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Session Title Duties and powers of auditor and Auditing Standards.

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Presentation on theme: "Session Title Duties and powers of auditor and Auditing Standards."— Presentation transcript:

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2 Session Title Duties and powers of auditor and Auditing Standards

3 Training Module on Audit of ULBs Session 11 2 Discussions on provision of statutory audit, duties and powers of the auditors to disallow surcharge/charge, audit report, follow-up action on audit report and auditing standards, reporting standards and certification of annual accounts as prescribed by C&AG of India. Session Overview Next

4 Training Module on Audit of ULBs Session 11 3 Learning Objective Information through group discussion and lecture will enable the participants basic concepts of their duties and powers, which will help them to focus on audit issues at the practical job scenario. Next

5 Training Module on Audit of ULBs Session 11 4 Statutory Audit for 1 KMC Chapter XI of The Kolkata Municipal Corporation Act, 1980 1 This is to be adopted as per State specific scenario

6 Training Module on Audit of ULBs Session 11 5 Appointment and powers of auditors Annual accounts of the preceding financial year shall be audited, at the end of the next financial year, by the State Government, or by the Auditor appointed by the State Government in this behalf. Next

7 Training Module on Audit of ULBs Session 11 6 Municipal Commissioner shall submit accounts to the auditors: Provided that the Municipal Commissioner shall not be bound to submit accounts of expenditure in connection with any anti- corruption work but shall, furnish certificate of all such expenditure. Appointment and powers of auditors Next

8 Training Module on Audit of ULBs Session 11 7 Auditors so appointed may- by written summons require the production before them of any document which they may consider necessary for the proper conduct of audit; Appointment and powers of auditors Next

9 Training Module on Audit of ULBs Session 11 8 by written summons require any person accountable for the custody of any such documents to appear in person before them or any officer subordinate to them; and Appointment and powers of auditors Next

10 Training Module on Audit of ULBs Session 11 9 require any person so appearing before them to make a declaration with respect to such document or to answer any question or to prepare and submit any statement. Appointment and powers of auditors Next

11 Training Module on Audit of ULBs Session 11 10 Report and information to be furnished by the auditors State Government or the auditors shall forward to the Mayor-in-Council information on – any material impropriety or irregularity which may be observed in the expenditure, or Next

12 Training Module on Audit of ULBs Session 11 11 Report and information to be furnished by the auditors the recovery of money due to the Corporation, or the accounts of the Corporation; on any loss or waste of money or property Next

13 Training Module on Audit of ULBs Session 11 12 may forward the names of the persons who in their opinion, are directly or indirectly responsible for such loss or waste; Report and information to be furnished by the auditors Next

14 Training Module on Audit of ULBs Session 11 13 as soon as may be after the completion of audit deliver to the Mayor-in-Council a report on the accounts of the Corporation and submit a duplicate copy thereof to the Corporation; Report and information to be furnished by the auditors Next

15 Training Module on Audit of ULBs Session 11 14 To conduct a special audit of receipt or expenditure of the Corporation in consultation with the Mayor-in-Council, and transmit a report on the same to the Mayor- in-Council. Report and information to be furnished by the auditors Next

16 Training Module on Audit of ULBs Session 11 15 Mayor-in-Council to remedy defects and report to the State Government Mayor-in-Council shall forthwith remedy any defects or irregularities pointed out by the State Government or the auditors and shall report to the Corporation and the State Government, the action taken by it, provided- Next

17 Training Module on Audit of ULBs Session 11 16 In case of difference of opinion between the Mayor-in-Council and the auditors, the Mayor-in-Council shall refer the matter to the State Government within due time; State Government shall pass such orders thereon as it thinks fit. Mayor-in-Council to remedy defects and report to the State Government Next

18 Training Module on Audit of ULBs Session 11 17 Reference of reports to the Municipal Accounts Committee The Corporation shall refer all reports received from the auditors to the Municipal Accounts Committee for its examination and report. Next

19 Training Module on Audit of ULBs Session 11 18 Reference of reports to the Municipal Accounts Committee (MAC) Report of the MAC shall be discussed at a meeting of the Corporation for such decision as the Government may think fit: Next

20 Training Module on Audit of ULBs Session 11 19 Corporation shall publish the auditor’s reports together with the report of the MAC, if any, and the decision of the Corporation thereon. Reference of reports to the Municipal Accounts Committee Next

21 Training Module on Audit of ULBs Session 11 20 Powers of the auditors to disallow, surcharge and charge The auditors shall, after considering explanation given by the person concerned, disallow every item of accounts contrary to the Act, and surcharge the amount of any illegal payment on the person making or authorizing such payment, Next

22 Training Module on Audit of ULBs Session 11 21 charge against any person responsible the amount of any deficiency incurred by the negligence or misconduct. Powers of the auditors to disallow, surcharge and charge Next

23 Training Module on Audit of ULBs Session 11 22 The auditors shall record the reasons for surcharge or charge and serve a certificate in this regard in their report to the Mayor-in-Council, the Corporation and the State Government. Powers of the auditors to disallow, surcharge and charge Next

24 Training Module on Audit of ULBs Session 11 23 Effect of non-payment of certified amount Where such person has not paid such amount within three months from the date of such certificate, the said person- Next

25 Training Module on Audit of ULBs Session 11 24  shall be deemed to have vacated his seat or to have been dismissed from the service  shall not be eligible for re-election or reappointment, as the case may be, until the aforesaid amount has been paid by him. Effect of non-payment of certified amount Next

26 Training Module on Audit of ULBs Session 11 25 Statutory Audit for [1] other Municipalities and Corporations [1] [Sections 86 to 90 of The West Bengal Municipal Act, 1993 and Chapter V of The West Bengal Municipal (Finance and Accounting) Rules, 1999] [1][1] This is to be adopted as per State specific scenario

27 Training Module on Audit of ULBs Session 11 26 Appointment and power of the Auditor Audit of the Annual Accounts of each Municipality or Corporation shall be conducted by the Auditor appointed by the State Government. Next

28 Training Module on Audit of ULBs Session 11 27 Appointment and power of the Auditor The Chairman-in-Council/Mayor shall submit such further accounts to the Auditor as may be required by him. Next

29 Training Module on Audit of ULBs Session 11 28 Function and duty of the Auditor Auditor shall see: that they have been kept and are presented in proper form, that the particular items of receipts and expenditure are stated in sufficient detail, Next

30 Training Module on Audit of ULBs Session 11 29 that the payments are supported by adequate vouchers and authority, that all sums received or which ought to have been received are brought into account. Function and duty of the Auditor Next

31 Training Module on Audit of ULBs Session 11 30 Audit report Auditor shall prepare the report not later than three months of the completion of report shall send the report to the Chairman/Mayor and a copy thereof to the Director of Local Bodies. Next

32 Training Module on Audit of ULBs Session 11 31 The auditor shall include in his report a statement showing – every payment which appears to be contrary to law, account of any deficiency or loss which appears to have been caused by the gross negligence of any person, Audit report Next

33 Training Module on Audit of ULBs Session 11 32 the account of any sum received, which ought to have been brought into account, any other material impropriety or irregularity which may be observed in the accounts. Audit report Next

34 Training Module on Audit of ULBs Session 11 33 The Chairman/mayor shall forward audit report to the Municipal Accounts Committee for their examination and scrutiny. Action on the Audit report Next

35 Training Module on Audit of ULBs Session 11 34 The said Committee after examination / scrutiny shall forward their para-wise findings to the Chairman/Mayor within a fortnight. Action on the Audit report Next

36 Training Module on Audit of ULBs Session 11 35 The Chairman/ Mayor shall place audit report along with the findings of the MAC within a week before the Chairman-in-Council to consider the objections and findings of the auditor read with the findings of the Municipal Accounts Committee and to decide upon the actions to be taken in regard thereto. Action on the Audit report Next

37 Training Module on Audit of ULBs Session 11 36 The Chairman/Mayor shall cause for immediate implementation of those decisions. Action on the Audit report Next

38 Training Module on Audit of ULBs Session 11 37 Submission of report to the Director of Local Bodies Within three months the Chairman/Mayor shall submit- para-wise replies on the audit report, action taken decisions of the Board of Councillors to the Directorate of Local Bodies, West Bengal Next

39 Training Module on Audit of ULBs Session 11 38 Action by the Municipality / Corporation and the Director of Local Bodies In case of difference of opinion the Chairman/Mayor would forthwith refer the same to the Board of Councillors for their decision on the points of dispute as raised. Next

40 Training Module on Audit of ULBs Session 11 39 Board of Councilors will take their decisions as deemed fit and proper within a month. If the difference still persists, the matter would have to be referred immediately to the Director of Local Bodies, West Bengal for decisions. Action by the Municipality / Corporation and the Director of Local Bodies Next

41 Training Module on Audit of ULBs Session 11 40 Action by the Director of Local Bodies, West Bengal The Director of Local Bodies shall forward the same within a month from the date of its receipt to the Examiner of Local Accounts, West Bengal, along with his comments thereon in duplicate, and Next

42 Training Module on Audit of ULBs Session 11 41 Action by the Director of Local Bodies, West Bengal a copy thereof to the Government identifying the areas where Government decisions are called for. Next

43 Training Module on Audit of ULBs Session 11 42 Preparation and submission of audit report The Chairman shall present the audited accounts with audit certificate to the State Government within the 30th day of November of the year succeeding the year to which the accounts relate. Next

44 Training Module on Audit of ULBs Session 11 43 Special audit In addition, the State Government may appoint an Auditor to conduct special audit pertaining to a specified item the procedure relating to audit shall also apply mutatis mutandis to such special audit. Next

45 Training Module on Audit of ULBs Session 11 44 Auditing standards, Reporting standards, Certification of annual accounts of ULBs

46 Training Module on Audit of ULBs Session 11 45 Auditing Standards prescribe the norms which the Auditors are expected to follow in the conduct of audit. Next

47 Training Module on Audit of ULBs Session 11 46 Auditing Standards provide minimum guidance to the Auditor that helps determine the extent of auditing, steps and procedure that should be applied in the audit. Next

48 Training Module on Audit of ULBs Session 11 47 constitutes the criteria / yardstick against which the quality of audit results are evaluated. Auditing Standards Next

49 Training Module on Audit of ULBs Session 11 48 The Auditor must exercise due care and concern in complying with the auditing standards. Auditing Standards Next

50 Training Module on Audit of ULBs Session 11 49 Detailed instructions on the issue have been prescribed by the C&AG of India in the manual entitled “Auditing Standards for Panchayati Raj Institutions & Urban Local Bodies”. Auditing Standards Next

51 Training Module on Audit of ULBs Session 11 50 Now we will be discussing some major areas of Auditing Standards viz. General Standards Field Standards Reporting Standards Auditing Standards Next

52 Training Module on Audit of ULBs Session 11 51 General Standards It defines  The basic professional needs of the auditor,  his awareness of his responsibilities and  zeal to develop necessary skills and tasks Next

53 Training Module on Audit of ULBs Session 11 52  Auditor  must be independent.  free from personal or external impairments to independence, General Standards - salient features Next

54 Training Module on Audit of ULBs Session 11 53  must be institutionally independent and  shall maintain an independent attitude and appearance.  must possess the required competence. General Standards Next

55 Training Module on Audit of ULBs Session 11 54 General Standards Performance and exercise of technical skill should be of a quality appropriate to the complexities of a particular audit. Next

56 Training Module on Audit of ULBs Session 11 55 General Standards Auditors need to be alert to detect control weaknesses, inadequacies in record keeping, errors and unusual transactions or results which could be indicative of fraud. Next

57 Training Module on Audit of ULBs Session 11 56 General Standards The Auditor must exercise due care in planning, specifying, gathering and evaluating evidence and in reporting findings, conclusions and recommendations. Next

58 Training Module on Audit of ULBs Session 11 57 Field Standards Establish the criteria or overall framework for the purposeful, systematic and balanced steps or actions that the Auditor has to follow in conducting audit. Next

59 Training Module on Audit of ULBs Session 11 58 Field Standards Now we will discuss three major components of Field Standards, viz.: Applicability, Audit Evidence, Internal Control. Next

60 Training Module on Audit of ULBs Session 11 59 The field standards applicable to all types of audit: The Auditor should plan the audit on risk based analysis, which ensures that an audit of high quality is carried out in an economic, efficient and effective way and in a timely manner; Next

61 Training Module on Audit of ULBs Session 11 60 The field standards applicable to all types of audit: The work of the audit staff at each level and phase should be properly supervised during the audit and a senior member of the audit staff should review documented work; Next

62 Training Module on Audit of ULBs Session 11 61 The field standards applicable to all types of audit: Auditor should design audit procedures to provide reasonable assurance of detecting errors and irregularities that could have a direct effect on the financial statement accounts; Next

63 Training Module on Audit of ULBs Session 11 62 The field standards applicable to all types of audit: Auditors should analyze the financial statements to establish whether prescribed accounting procedure are complied with. Analysis of financial statements should be performed to express an opinion on financial statements. Next

64 Training Module on Audit of ULBs Session 11 63 Field Standards – audit evidence Sufficient, competent, relevant and reliable evidence should be obtained to support the Auditor’s judgment and conclusions regarding the body, programme, activity or function under audit; Next

65 Training Module on Audit of ULBs Session 11 64 Field Standards – audit evidence The data collection and sampling techniques should be carefully chosen; adequately documented Next

66 Training Module on Audit of ULBs Session 11 65 Field Standards Adequate documentation is important for several reasons. It will  Confirm and support the Auditor’s opinions and reports;  Increase the efficiency and effectiveness of the audit. Next

67 Training Module on Audit of ULBs Session 11 66 Field Standards The Auditor should study and evaluate the reliability of internal control. The study and evaluation of internal control should be carried out according to the type of audit undertaken; Next

68 Training Module on Audit of ULBs Session 11 67 Field Standards In the case of financial audit, study and evaluation are made mainly on controls that assist in safeguarding assets and resources and assure the accuracy of accounting records; Next

69 Training Module on Audit of ULBs Session 11 68 Field Standards Where accounting or other information systems are computerized, the Auditor should determine- whether internal controls are operating effectively to provide reliability of and security over the data being processed. Next

70 Training Module on Audit of ULBs Session 11 69 Field Standards The object is to point out, inter alia: Absence of appropriate segregation of duties consistent with appropriate control objectives; Absence of appropriate reviews and approvals of transactions, accounting, entries or systems output; Next

71 Training Module on Audit of ULBs Session 11 70 Field Standards Inadequate provisions for the safeguarding of assets; Evidence of failure to safeguard assets from loss, damage or misappropriation; Next

72 Training Module on Audit of ULBs Session 11 71 Field Standards Evidence of failure to perform tasks that are part of internal control, such as reconciliation not prepared or not timely prepared; and, Failure to follow up and correct previously identified deficiencies in internal control. Next

73 Training Module on Audit of ULBs Session 11 72 Reporting Standards Constitute the framework for the audit organisation and the Auditor to report the results of audit of regularity or performance audit or express his opinion on a set of financial statements. Next

74 Training Module on Audit of ULBs Session 11 73 Reporting Standards The report ibid will include a certificate. Detailed instructions in this regard have been prescribed by the Comptroller & Auditor General of India in Chapter IV of the Manual entitled “Auditing Standards for Panchayati Raj Institutions & Urban Local Bodies”. Next

75 Training Module on Audit of ULBs Session 11 74 Reporting Standards With regard to regularity audits, the Auditor should prepare a written report which may either be a part of the report on the financial statements or a separate report on the tests of compliance of applicable laws and regulations. Next

76 Training Module on Audit of ULBs Session 11 75 Reporting Standards the report should include a description of the scope and coverage of audit, objective of audit, area of audit, main findings in respect of the efficiency, economy and effectiveness. Next

77 Training Module on Audit of ULBs Session 11 76 Audit of Financial Statements, vis-à-vis, Audit Certificate With regard to audit of financial statements, the Auditor should prepare a report expressing opinion on the fair presentation of the financial position of the audited entity in the financial statements. Next

78 Training Module on Audit of ULBs Session 11 77 Audit of Financial Statements, vis-à-vis, Audit Certificate The Auditor’s certificate shall state expressly:  the financial statements to which it relates;  that the audit has been carried out in accordance with the relevant statutory authority and,  an opinion about the accounts which the Auditor has formed as a result of the audit. Next

79 Training Module on Audit of ULBs Session 11 78 Audit of Financial Statements, vis-à-vis, Audit Certificate Audit has to be planned to enable the certificate to be given. The planning of audit follows familiarisation with the auditee’s financial and accounting system and control procedures. Next

80 Training Module on Audit of ULBs Session 11 79 Audit of Financial Statements, vis-à-vis, Audit Certificate The planning of audit would, inter alia, involve:  Examining the legislation which affects the auditee i.e. legislation that governs the ULBs;  Confirming the scope of audit and the authority for it; Next

81 Training Module on Audit of ULBs Session 11 80 Audit of Financial Statements, vis-à-vis, Audit Certificate  Studying and evaluating the reliability of internal controls;  Occurrence – all recorded transactions properly occurred and were relevant to the year of account; Next

82 Training Module on Audit of ULBs Session 11 81 Audit of Financial Statements, vis-à-vis, Audit Certificate  Disclosure – the recorded transactions have been properly classified where appropriate; and  Regularity - the recorded transactions are in accordance with the legislation and other specific provisions. Next

83 Training Module on Audit of ULBs Session 11 82 Audit of Financial Statements, vis-à-vis, Audit Certificate Audit should ensure that- the account has been prepared in the correct form; all information has been obtained to enable the auditor to arrive at the audit opinion and determine the form of the certificate; working papers have been documented and are adequate to support the audit opinion. Next

84 Training Module on Audit of ULBs Session 11 83 [3] [3] The position in West Bengal [3] This is to be adopted as per State specific scenario[3] The statutory provisions contained in the relevant Municipal/Corporation Acts and the rules framed there under do not expressly provide for the certification of accounts by statutory Audit. Next

85 Training Module on Audit of ULBs Session 11 84 The position in West Bengal Guidelines of the C&AG of India : an audit certificate on the annual financial statements is to be issued by the O/O the Examiner of Local Accounts, WB after completion of the audit of the respective annual financial statements and Balance Sheet. Next

86 Training Module on Audit of ULBs Session 11 85 The position in West Bengal It is desirable that the State Government may incorporate a statutory provision for the certification on the annual accounts of the Municipalities/Corporations by making suitable amendment in the respective Act/Rules with a view to providing greater transparency in the maintenance of accounts. Next

87 Training Module on Audit of ULBs Session 11 86 Drafting of Audit Inspection Report The effectiveness of inspections lies in reporting the results of inspections to the appropriate authority of the auditee organisation. Next

88 Training Module on Audit of ULBs Session 11 87 Drafting of Audit IR- points to be kept in view should be written up continuously as the inspection proceeds so as to be ready as soon as it is completed; comments should be brief, intelligible and to the point; Next

89 Training Module on Audit of ULBs Session 11 88 Drafting of Audit IR- points to be kept in view objections should be made out in courteous and gentle language; any statement or criticism should be accurate, fair, moderately worded and dispassionate. Next

90 Training Module on Audit of ULBs Session 11 89 Drafting of Audit IR- points to be kept in view innuendo is forbidden. If a charge cannot be substantiated, there should not be even any hint of it in the write up; write up should contain full reference to the relevant documents; Next

91 Training Module on Audit of ULBs Session 11 90 Drafting of Audit IR- points to be kept in view statutory orders or rules, considered to have been violated, should be explicitly stated; objections should be arranged in logical sequence; objections of similar type should be grouped together; Next

92 Training Module on Audit of ULBs Session 11 91 Drafting of Audit IR- points to be kept in view audit function demands the highest qualities of understanding, balanced judgment and sense of proportion; Undue insistence on trifling errors and use of too much technical expression should be avoided as far as possible; Next

93 Training Module on Audit of ULBs Session 11 92 Drafting of Audit IR- points to be kept in view Mention of the names of the officials should be avoided except in case of personal claim; Suggested headings should be given above the different paragraphs in indication of contents. Next

94 Training Module on Audit of ULBs Session 11 93 Drafting of Audit IR- points to be kept in view The culmination of the audit process is the reporting which summarises the evidence gathered during the conduct of audit and communicates the audit opinion and other findings. Next

95 Training Module on Audit of ULBs Session 11 94 Drafting of Audit IR- points to be kept in view Audit Report should be prepared in such a way so that audit observations are easy to understand; Delay in submission of report may make it irrelevant and corrective action may not be practicable; and Next

96 Training Module on Audit of ULBs Session 11 95 Drafting of Audit IR- points to be kept in view tone of reports should encourage decision- makers to act on the Auditor’s findings and recommendations. Next

97 Training Module on Audit of ULBs Session 11 96 [1] [1] Submission of Inspection Reports [1] [1] This is to be adopted as per State specific scenario Municipal Acts in West Bengal do not prescribe any format for submission of the Audit Inspection Report. Next

98 Training Module on Audit of ULBs Session 11 97 Submission of Inspection Reports Section 87(2) of the West Bengal Municipal Act, 1993 provides that the Auditor appointed by the State Government shall include in report a statement showing - Next

99 Training Module on Audit of ULBs Session 11 98 Submission of Inspection Reports every payment which appears to him to be contrary to law; account of any deficiency or defalcation or loss which appears to have been caused by the gross negligence or misconduct of any person;

100 Training Module on Audit of ULBs Session 11 99 Submission of Inspection Reports the account of any sum received, which ought to have been, but have not been, brought into account by any person; any other material impropriety or irregularity which may be observed in the accounts. The End


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